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Abstract
The purpose of this report is to improve understanding of USDA crop forecasting
methods, performance and market impact. A review of USDA’s forecasting procedures
and methodology confirmed the objectivity and consistency of the forecasting process
over time. No changes in methodology occurred in 2003. Month-to-month changes in
corn and soybean production forecasts from 1970 through 2003 indicated little difference
in magnitude and direction of monthly changes over time. USDA production forecast
errors were largest in August and smaller in subsequent forecasts. There appeared to be
no trend in the size or direction of forecast errors over time. On average, USDA corn
production forecasts were more accurate than private market forecasts over 1970-2003,
with the exception of August forecasts since the mid-1980s. Private market forecasts in
soybeans were more accurate than USDA forecasts for August, regardless of the time
period considered. As the growing season progresses the USDA’s relative accuracy in
soybeans improved. USDA corn production forecasts had the largest impact on corn
futures prices in August and recent price reactions have been somewhat larger than
historical reactions. For soybeans, the largest reactions in futures prices occurred in
August and September, but recent reactions have been large in October. Overall, the
analysis suggests the USDA performs reasonably well in generating crop production
forecasts for corn and soybeans.